Econ Chapter 9

Most product markets are perfectly competitive.

False

Patents are a barrier to entry

True

In a perfect competitive industry, economic profit:

Will approach zero in the long run as process are driven to the level of average production cost

The equilibrium price of a good or service in a competitive market is

A reflection of the opportunity cost of producing the product.

Profit per unit is maximized when the firm produces the output where

ATC is minimized

Technological improvements cause

ATC to shift down.

If economic profits are earned in a competitive market, then over time

Additional firms will enter the market.

In a perfect competitive market where firms are currently experiencing economic profits in the short-run, which of the following is least likely to occur during the long-run?

An increase in marginal revenue

When economic profits exist in the market for a particular product, this is a signal to producers that

Consumers would like more scarce resources devoted to the production of this product.

In a competitive market, if the market price is equal to the minimum point of the firm's ATC curve, the firm may seek to earn economic profits by

Decreasing production costs through technological improvements

One World View article is titled "Flat Panels, Thin Margins." New firms continue to enter the industry even though prices are falling because

Economic profits are being earned

If long-run economic losses are being experienced in a competitive market,

Equilibrium price will rise as firms exit.

perfectly competitive firms always earn economic profits in the short run.

False

In figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In figure 23.3, at a price ofp1 in the long run

Firm will enter the market

In a perfectly competitive market in the long run, which of the following is not correct?

Firms are maximizing total revenue.

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and a diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: Figure 23.3, at a price of p2 in the long run

Firms will enter the market

If price is above the long-run competitive equilibrium level,

Firms will enter the market.

Which of the following is not a barrier to entry?

Homogeneous products

The price signal the consumer gets in a competitive market

Is an accurate reflection of opportunity cost.

The equilibrium price in a competitive market

Is the price at which the quantity of a good demanded in a given time period equals the quantity supplied

When a firm is earning economic profit, this indicates the firm is

Is using its in the best possible way

When athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too

Little because society would be willing to give up more alternative goods in order to get additional shoes.

In a competitive market

Neither buyers nor sellers have market power

Refer to figure 23.5 for a perfectly competitive firm. Given the current market price of $200, we expect to see

No change in the number of firms in the industry and no change in the market price

A perfectly competitive market results in efficiency because

Price is driven down to minimum ATC.

Refer to figure 23.1. If the market price equaled $10, in the short run this firm should

Produce with an economic loss

The exit of firms from a market, ceteris paribus

Reduces the economic losses of remaining firms in the market.

To determine the market supply, the quantities

Supplied at each price by each supplier are added together.

Refer to figure 23.5 for a perfectly competitive firm. if more efficient production techniques were developed in this market, which of the following changes would we expect to occur, ceteris paribus?

The ATC, MC and market price would all decrease

Refer to figure 23.5 for a perfectly competitive firm. Which of the following is not true for this firm at a price of $200?

The firm should leave this market in an effort to earn economic profits.

If catfish farmers expect catfish prices to fall in the future, then right now

The market supply curve for catfish will shift to the right

If someone invents a better way to produce frozen pizzas, then

The market supply curve for frozen pizzas will shift to the right.

If a new sushi restaurant opens, then

The market supply curve for sushi will shift to the right.

Refer to figure 23.2 for a perfectly competitive firm. If this firm produces the level of output corresponding to point C in the short run, it will earn

The maximum profit possible

Which of the following is a determinant of market supply but not the supply curve of an individual firm?

The number of firms in the market.

Perfectly competitive firms cannot individual affect market prices because

There are many firms, none of which has a significant share of total output

A necessary condition for the operation of a perfectly competitive market is free entry and exit from the market

True

Economic losses mean that firms will exit from a market in the short run

True

In a perfect competitive market, firms will earn zero economic profits in the long run.

True

In order to attain the optimal mix of output, we must know the opportunity cost of producing different goods.

True

Maximize profits per unit always leads to the maximization of total profits

True

Technological improvements shift the average total cost and the marginal cost curve downward

True

The marginal cost pricing characteristic of competitive markets permits society to efficiently answer the WHAT to produce question

True

They decision by firms to enter a market shifts the market supply curve to the right

True

sellers in a perfectly competitive market are powerless to affect the market price of their product.

True

Which of the folllowing is characteristic of a perfectly competitive market?

Zero economic profit in the long run

If two products are homogeneous, then they

are identical

A competitive market creates strong pressure for technological innovation that

shifts the supply curve to the right

Refer to figure 23.5 for a perfectly competitive firm. If this firm produces the level of output corresponding to point B in the short run, it will earn

zero economic profit